TSMC 2Q26 performance outlook and CoWoS update: Demand for AI is booming, 3Q26 guidance is expected to exceed expectations, and capital expenditures will be significantly increased
Morgan Stanley gave a positive outlook on the eve of TSMC's earnings release.
Morgan Stanley gave a positive outlook on the eve of TSMC's earnings release. The report predicts that TSMC's 3Q26 revenue guidance will increase by 10-15% quarter-on-quarter (in U.S. dollars), exceeding the market consensus of 9%, and gross profit margin guidance will remain at a strong level of 67-68%. Its core driving force is the continued growth of AI accelerators (H100/B200/ASIC) and Apple A19. The logic behind this is that AI semiconductor demand is not only driven by GPUs, but ASIC and CPU demand are also rapidly expanding, resulting in extremely tight production capacity for advanced processes below 5nm. The market is divided on the long-term sustainability of AI demand, with MS seeing strong momentum continuing until at least 2028. One sentence conclusion: TSMC is standing at the starting point of a new round of AI capital expenditure super cycle. The intensity and sustainability of its upward revision of capital expenditure will completely eliminate the market's doubts about the "peaking" of AI demand and reshape the entire semiconductor equipment and materials industry. Good/bad: Good for TSMC (2330.TW) itself and the entire AI semiconductor industry chain (ASIC, HBM, equipment, materials). The market has already expected 1H26 results, but the upward revision of 3Q26 guidance and 2027 capital expenditures will be the core catalysts for exceeding expectations. Catalysts: 1) TSMC (July 18) 2Q26 conference, providing 3Q26 guidance and full-year capital expenditure plan; 2) Latest progress of CoWoS capacity expansion and customer allocation (NVIDIA, AMD, Broadcom, etc.); 3) Technology node progress and customer introduction of the 2nm/A16 process.